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RJR and the Bowman Gray family
(History of RJ Reynolds Tobacco) Three generations of the Bowman Gray family have been involved with the tobacco industry mainly through the family control over RJ Reynolds tobacco, but also through their influence in the Republican party.
Early History RJ Reynolds Tobacco Company was one of the original competitive companies formed by the judicial split up of the old tobacco trust (monopoly) which operated in the 1890s and early 1900s. For many years the company was headed by RJ Reynolds himself, but it gradually changed and became an old Southern family concern controlled by various lines of the family, and based in Winston-Salem, North Carolina.
In 1921, following World War I, Reynolds came under the control of the Gray family then headed by Bowman Gray I (aka Sr.). He made the company's fortune by introducing a pre-rolled American cigarette at a time when Egyptian tobacco was considered the best available. The cigarettes were sold under the "Camel " brand using Egyptian symbolism on the packet even though only a fraction of the tobacco actually came from the Middle East.
He was also the first to introduce mass advertising and aggressive marketing techniques, and by the time he died of a heart attack in 1935 the company was spending $200 million a year on advertising Camels alone.
Bowman Gray II (aka Jr.) took over the company a decade after World War II (He only became president in 1957). By then it was the top American cigarette company, but his tenure came at the time the smoking-health (S&H) controversy was just getting underway. Bowman Jr. lacked the entrepreneurial abilities of his father, and, during his time at the head of the company, Philip Morris (denigrated by the Southerners as an "upstart New York firm run by Jews" ) took the lead both in sales and in organising the combined industry's political and public-relations counter-measures to growing anti-smoking activism.
More than the managers of Philip Morris, Bowman Gray II became increasingly concerned about the health issues and began to move RJR into other businesses, both to decrease its reliance on cigarette sales and also to utilize the extraordinary profits generated by cigarettes. [Back in 1963 the RJR Tobacco company had had revenues of $117 million, while 20 years later it was a conglomerate with $14 billion in annual revenues.]
Bowman Gray Jr died in 1969 without designating an established successor or family succession path — which left Reynolds subject to constant managerial in-fighting and it became vulnerable to take-overs. These new managers were not confirmed tobacco executives like the members of the Bowman Gray family, so they focussed on the non-tobacco business, acquiring Del Monte (canned fruit) and Nabisco (biscuits etc.) and venturing into quite alien industries, including Sea-Land, the world's largest container shipping and transport company (1969) and Burmah Oil (in 1976).
The Junk-bond buyoutRoss Johnson, the CEO of Nabisco, eventually took control of the combined entity, and in 1988 he tried to organise an executive buyout of the company. RJR Nabisco (as it was then known) then became caught up in a complex leverage buyout by junk-bond dealers, Kohlberg, Kravis and Roberts (KKR) who split up the conglomerate and sold off constituent parts to finance their junk-bond purchase.
This left the tobacco company loaded with debt to the point where it couldn't expand internationally. So effectively it began to drop out of international competition after about 1995, leaving most of the running to Philip Morris and British-American Tobacco.
At about this time the company came under attack again from corporate raider Bennett LeBow who had purchased the smallest of the six US tobacco companies Liggett & Myers in 1986. He wanted to merge Reynolds with his own smaller L&M operation, then spin off Nabisco under his own control. LeBow was only really interested in the non-tobacco businesses, and he thought that this reverse-acquisition of the two tobacco companies would be highly profitable.
He was rebuffed, but in Mar-Apr 1996, LeBow took what he saw was defensive action for L&M's survival by initiating a private legal settlement with the Attorneys-General which guaranteed his small company would not be destroyed by successful State suits over Medicaid costs. This effectively destroyed the long-standing unity and collaboration within the industry over Smoking & Health issues.
LeBow's agreement with the Attorneys-General involved the release of what were confidential insider documents which contained information about industry lobbying, bribery and corruption. This left RJ Reynolds, Brown & Williamson, Lorillard, and Philip Morris high and dry, and they were forced to settle with the AGs and the Clinton Administration.
Post-Master Settlement Agreement In the late-1990s the European Union filed a lawsuit in a US Federal District Court alleging that RJR Nabisco had engaged in global money laundering for various mafia and organized crime groups. The statement of claims says:
"The RJR DEFENDANTS have engaged in and facilitated organized crime by laundering the proceeds of narcotics trafficking and other crimes.
The DEFENDANTS knowingly sell their products to organized crime, arrange for secret payments from organized crime, and launder such proceeds in the United States or offshore venues known for bank secrecy.
The RJR DEFENDANTS have, at the highest corporate level, determined that it will be a part of their operating business plan to sell cigarettes to and through criminal organizations and to accept criminal proceeds in payment for cigarettes by secret and surreptitious means,.
The Gray family
RJ Reynolds Tobacco owed much of its early success to a large network of family members in influential position, and to its long associations with the commercial/conservative faction of the Republican Party,
Prominent recent members of the Gray family were:
- Alice Shellton Gray; who founded the Human Betterment League (an organisation promoting eugenics)
- Gordon Gray; a businessman, newspaper-owner, radio network owner, and Secretary of War, who also established the Bowman Gray Medical School and donated heavily to Wake Field and Duke Universities (both of which had long links to RJ Reynolds). He was also associated with the eugenics movement (Birthright Inc, and Sterilization League of America), and he was a member of the powerful Council of Foreign Relations, and politically involved with the Republican Party.
- Lyons Gray: RJ Reynold Tobaco's international trade manager. He later became a Republican member of the North Carolina General Assembly, then from 2003, he was the chairman of the Environmental Protection Agency's finance board. In 2005 he was nominated by President GW Bush to become the chief financial officer of the US Environmental Protection Agency.
- Burton C Gray: radio and television station owner/executive; He was a trustee of the Philadelphia Society (the foundation supporting the Heritage Society, and various other right-wing think-tanks - all closely associated with Richard Mellon Scaife), and he was a board member of the Reason Foundation, Federalist Society, Libertarian Party, etc..
- C Boyden Gray: Lawyer lobbyist and think-tank operator:
- White House legal counsel for President Reagan and Bush I
- Adviser to Bush II.
- Key member of the Federalist Society
- partner and corporation lobbyist through Wilmer Cutler & Pickering,
- key figure in the Arkansas Project to dig out scandal on the Clintons.
- chairman/CEO of the Citizens for a Sound Economy and a number of associated think-tanks, policy institutes and pseudo-grassroots organisations.
He is also highly influential at the top levels of the Republican Party, and he provided political connections and support for the tobacco industry both in the party and in the White House. As a lobbyist, he had been a vigorous defender of other large industry groups in promoting small-government and unfettered free-enterprise, and is a recognised climate denier/lobbyist on behalf of major energy companies.